The unemployment rate fell to 9.4 percent last month, the lowest level in more than a year and a half, but payrolls increased by a less-than-expected 103,000, the Labor Department said Friday. More people found work, but some people gave up on their job searches.
The unemployment rate dropped sharply to 9.4 percent last month - its lowest level in more than a year and a half - as tens of thousands of people found new jobs but many others quit looking for work, the government said Friday.
The Labor Department reported that employers added 103,000 jobs in December, with an influx of 113,000 jobs from private employers but a drop of 10,000 government positions. That was far fewer than the 150,000 new jobs that many economists expected and the roughly 125,000 needed to account for people entering the labor pool.
The government also said more people were hired in October and November than first estimated: 210,000 jobs in October, up from 172,000, and 71,000 in November, up from 39,000.
"Obviously, 100,000 new jobs is decent, but we're going to have to do a lot better than that if we want to bring the unemployment rate down," said Guy Faucher, director of Moody’s Analytics in West Chester, Pa. "I wouldn't be surprised to see the unemployment rate actually move higher in the first half of 2011, because you'll have people who have been discouraged from looking for work start to job hunt again."
Fewer people said they were out of work last month, and the number of people out of work fell by more than 500,000 to just under 14.5 million, the lowest since April 2009. But another key reason for the drop in unemployment, from 9.8 percent in November, is that the government no longer counts people as unemployed when they stop looking for work.
Including those who are working part-time but would prefer full-time work, and those who have given up looking for work, the so-called underemployment rate was 16.7 percent last month. That's down from 17 percent in November.
Stephen Bronars, senior economist with Welch Consulting, said he was somewhat encouraged by the Labor report but that December's jobs numbers were "a bit of a wash" overall.
"There are a lot of seasonal adjustments that go into that number …we've got a lot of people moving in and out of the unemployed category," he said. "We're pretty much just treading water over the last few months."
White House chief economic adviser Austan Goolsbee told MSNBC on Friday that the decline in the unemployment rate showed the economy was moving in the right direction, but that "we've got a long way to go."
The Labor Department report comes amid generally brighter economic data in recent weeks as the economy emerges in fits and starts from the longest and sharpest recession in living memory.
Factories have ramped up production, and the service sector is growing at its fastest pace in more than four years. Fewer people applied for unemployment benefits over the past month than in any other four-week period in more than two years. Consumers are also spending more freely, and a payroll tax cut is likely to boost their activity further.
Many economists expect hiring to ramp up this year, with some predicting double last year's total of jobs. A tax cut package enacted last month also should boost consumer and business spending.
The employment report comes as President Obama is expected later Friday to appoint Gene Sperling as director of the National Economic Council, a position with oversight of White House policy. He replaces outgoing director Lawrence Summers.
Sperling's appointment is part of a broader shakeup in White House senior staff in which William Daley was named as chief of staff and press secretary Robert Gibbs announced Wednesday that he would step down in the coming months.
Federal Reserve Chairman Ben Bernanke addressed members of the Senate Budget Committee on Friday morning – his first such appearance since November, when he announced a controversial plan to buy $600 billion in Treasury bonds.
Republicans and some Fed officials have opposed the plan, saying it could spur inflation. On Friday, Bernanke was expected to defend and deliver a rosier outlook for the economy in 2011.
Bernanke cited improvements in consumer spending and a drop in jobless claims as hopeful signs.
"We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold," he told lawmakers. Without a bond-buying plan, Bernanke said, there was a risk of very low rates of inflation that, along with high unemployment and other factors, "could threaten the strength and sustainability of the recovery."
Material from The Associated Press was used in this report. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.